BERLIN (Reuters) - Germany continued its push against European Central Bank policy on Thursday, when a senior member of Chancellor Angela Merkel’s conservatives asserted the ECB has damaged the European project with its bond buying programme and could only regain trust by scaling back its ultra-loose monetary policy.
The comments by Werner Bahlsen, head of the economic council of Merkel’s CDU conservatives, came after Finance Minister Wolfgang Schaeuble on Tuesday urged the ECB to change its policy “in a timely manner”, warning that very low interest rates had caused problems in some parts of the world.
Germany is heading towards a federal election in September. The ECB’s 2.3 trillion-euro (2.01 trillion pounds) bond-buying scheme is set to run until the year’s end, so it will have to decide around that time whether to keep on buying to prop up a still- weak inflation rate or start winding down the programme.
Germany, the bloc’s largest economy, and other northern countries say the bond purchases are eroding the assets of savers and discouraging other euro zone countries from pursuing reforms to make their economies more efficient.
With growth in the euro zone picking up, German politicians argue the time has come for the ECB to step back - although Schaeuble is also benefiting from record-low borrowing costs.
“The ongoing purchase of government bonds has already cost the European project a great deal of credibility and has damaged it,” Bahlsen said. “The ECB can only regain trust with the return to a sound monetary policy.”
A survey by the CDU’s economic council showed that less than a quarter of its roughly 12,000 members had confidence in the ECB’s course. Seventy-six 76 percent said they backed Bundesbank head Jens Weidmann’s monetary policy stance.
Weidmann said on Wednesday that the ECB, now a top creditor to euro zone governments, is at risk of coming under political pressure because any hint of policy tightening poses the risk of pushing yields higher and blowing a hole in national budgets.
Reporting by Michael Nienaber, editing by Larry King